Asian stocks faltered Wednesday while the Australian dollar and emerging market currencies slid, with investors reluctant to keep a near three-month rally in risky assets going without more good economic news.
Reports showing an unexpected decline in U.S. housing starts to a record low and the worst-ever contraction in Japan's economy in the first quarter prompted investors to shift money to defensive sectors and trim their exposure to emerging markets.
A key gauge of Australian consumer sentiment also tumbled despite rallying equity markets, paving the way for dealers to take some profits on the Australian dollar's rise on Tuesday after it earlier hit a seven-month high. Data released just before Tokyo's open showed Japan's economy shrank 4.0 percent in the first quarter. This is the biggest contraction on record, but economists see a return to modest growth in coming quarters for the world's No.2 economy.
The U.S. dollar strengthened broadly against regional currencies, rising against the South Korean won and against the Philippine peso. The dollar slid against the yen , having carved out a range of about 94.50 to 101.00 in the last three months. Oil futures edged below $60 a barrel after rising to a six-month intraday high of $60.48 a barrel on Tuesday after refinery problems raised fears about tight supply in the summer.
Japan's Nikkei 225 Average finished 0.6 percent higher as trading firms jumped after a brokerage upgraded Mitsubishi, but a slightly firmer yen weighed on exporter shares such as Honda Motor. Nissan Motor jumped 5 percent after the automaker
said orders for its low-emission cars in Japan are up 30 percent so far in May, while T&D Holdings plunged after Nomura cut its rating on the insurance group.
Seoul shares closed half a percent higher, helped by gains in some technology issues on the back of strengthening earnings outlooks, but banks fell after ratings agency downgrades.
Australian stocks inched up 0.2 percent, with gains in resource firms offsetting slippage in the banks, as investors continued a trend of taking on more risk with cyclical stocks.
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Hong Kong shares were 0.4 percent lower. But Bank of East Asia climbed, extending Tuesday's sharp gains, on news that the Hong Kong-based lender along with HSBC will be first foreign banks to issue yuan-denominated bonds in Hong Kong, giving them another source for yuan financing. But shares in global lender HSBC, which vaulted to a four-month high on Tuesday, pulled back 0.6 percent as dismal U.S. housing data weighed.
Singapore's Straits Times Index fell 0.9 percent, with banks such as DBS Group and UOB tracking lower.
China's Shanghai Composite Index slipped 0.9 percent as steel shares fell on uncertainty over iron ore price talks but auto firms and home appliance makers outperformed, lifted by the government's expanded subsidy scheme.